Hampton Inn general manager Mike Drehobl holds a remote with SaveME Batteries. The company is testing a program at the hotel where it checks and replaces batteries on an organized schedule. K.C. Alfred • U-T﻿ photos

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Hampton Inn general manager Mike Drehobl holds a remote with SaveME Batteries. The company is testing a program at the hotel where it checks and replaces batteries on an organized schedule. K.C. Alfred • U-T﻿ photos

Inspiration struck and he began working this business model for batteries.

He came up with the idea of a vending machine where consumers could exchange their old AA and AAA batteries for new ones that have been recharged, instead of using and tossing single-use batteries, and cofounded SaveME Batteries with Joe Yeagley.

“Chi looked at why the rechargeable market had not taken off and found that it was dominated by just a couple (of) major players that did not want to change status quo,” said Yeagley. “That made him wonder why consumers haven’t done anything about it — and figured it was primarily because of the cost — it takes $12-$15 for a set of four rechargeable batteries and to switch them out while they recharge, another $12-$15.”

Aside from the cost, Yau, who is CEO of SaveME Batteries, found there was also the hassle of remembering to recharge batteries. The rechargeable battery market, which has about 2 percent of the total market share, had high costs of entry and poor performance due to frequent self-discharge (when the batteries drain as they sit idle) and inexpensive chargers that were sometimes unreliable.

“So the key was to figure out how to dramatically lower the cost to the consumer, improve performance and simplify user experience,” Yau said.

First, he had to figure out how to make standard AA and AAA batteries as “containers” that could be used, refilled and reused. From there it was a short leap to decide to sell them through vending machines where consumers could exchange used batteries for new ones.

Exchange, don’t buy

Yau saw how successful automated vending machine businesses like Redbox, which lends movie DVDs, and ecoATM, which recycles used cellphones, were and decided that model could work just as well for batteries.

Consumers pay $3 for a set of four batteries at SaveME vending machines, plus a $1 refundable deposit the first time they use the kiosk.

The startup’s batteries can replace AA and AAA batteries used in toys, remotes and other electronic devices. Yeagley, SaveME’s executive vice president and general manager, said for now the company is focusing on these two models, since they represent 80 percent of the battery market, but it plans to develop equivalents for C and D batteries.

It has a model vending kiosk set up at a gas station in Carlsbad and is working with organic grocery store chains like Whole Foods to put kiosks outside its stores. By year-end, it expects to have 20 locations. It also plans to go after national retail chain stores, too.

Yau and Yeagley met while working for another San Diego company, green battery maker Power Genix, and reconnected two years ago at a coffee shop. The battery and power industry veterans work with a third co-founder, Z.G. Fan, who is based in China and who takes care of operations.

So far funding has been internally raised between the co-founders, but the startup is actively looking for investors to expand operations.

SaveME Batteries, which started in 2011, was one of the top five graduates of innovation accelerator Connect’s “Springboard Program,” which coaches startups and helps them get ready for commercialization.

Improved technology

Familiar with different battery technologies, Yau worked on finding the right manufacturers with the right type of rechargeable batteries, a process that was relatively straightforward.

“Then I started talking to a couple of folks in the vending-machine business and found a company that would retrofit an old cigarette machine to work with my batteries. We changed the signage and moved a few parts around so it would handle packages of AA and AAA batteries,” Yau said. “It took only a few months and once it proved successful, we were off to the races.”

Yeagley noted that single-use batteries are typically manufactured several years ahead of use, because they’re made in huge volumes. He said SaveME would not have to crank them out on the same scale, since consumers would bring them back to be recharged.

The company has a facility in Escondido where it does mass recharging, a process that Yeagley did not discuss, calling it a trade secret. But he said the company can recharge thousands of batteries fairly quickly and place them back in the kiosks.

Will consumers go for it?

The challenge for the company is not just rolling out more locations but also getting consumers to change habits: Will consumers come to kiosks and exchange batteries instead of buying single-use ones?

“You can’t force someone to do something. But you can create a situation that is very difficult to pass up,” Yeagley said.

“Our target is families with children between the ages of 5-15, who deal with not just buying lots of batteries, but also disposing them. So we’ve got to make it visible, build our brand name and get people to go there,” he added. “While we won’t convert everyone, we believe a large segment will want to go green, save money and the hassle of disposing single-use batteries. We’re relying on the guilt complex driven by the massive amount of waste that takes place every day.”

Corporate market

SaveME is also going after large-volume commercial users like hotels that go through a lot of batteries each year for their key card access units on doors and for TV remotes in rooms.

In contrast to its consumer kiosks, the company offers battery management services to hotels, taking over the hassle of checking that batteries in the devices work and replacing them when needed, on an organized schedule.

A common complaint for hotel guests is that key cards don’t work and usually drained batteries are the culprits, because many hotels don’t have a system for checking and replacing batteries. Instead they deal with it when there’s a complaint or when housekeeping employees notice a problem.

SaveME runs a pilot program at the Hampton Inn in Del Mar, which has 129 hotel rooms with four batteries in each of its key card access units and remotes.

“It’s cost effective and makes financial sense. It also helps not having to worry about batteries not working,” said Mike Drehobl, the hotel’s general manager.

Drehobl said the hotel, which has been using the system for only a few months, is spending less than it does on replacing single-use batteries in a year, even if the initial outlay is more.

Yeagley sees hotels becoming a fairly significant revenue stream for the company and said they’re easy to service since they don’t require the vending machine or any capital outlay, since replacement service is done manually.

Business model

Both Yau and Yeagley responded well to advice given by mentors Connect assigned to them while they went through the Springboard coaching program, and this is always a good sign, said Ruprecht von Buttlar, vice president of business creation and development at Connect.

He considers their model compelling and expects it will boost sustainable battery usage.

“They’ve proved their technology and business model is going to work, so they’re in a good position to get seed funding in the next 12 months or so,” von Buttlar said. “The challenge is that this is a new model neither of them has done before. They need to make sure their rollouts with the grocery stores go well.”

When Chi Yau was puzzling over why the battery market was so huge and why consumers used so many batteries, he came across Blue Rhino, which has consumers bring in the propane gas cylinders they used for their backyard barbecues and exchange them for new ones, paying only for the gas, but not the cylinder itself, after the first purchase.